Texas insurers and larger carriers that do business in Texas will see some strains from Hurricane Harvey and the historic rains and flooding that followed. But A.M. Best expects them to withstand the resulting catastrophe losses they’ll be covering for the “unprecedented” disaster.
“While a considerably large event, losses from Hurricane Harvey are unlikely to exceed few, if any insurers’ top reinsurance limits,” A.M. Best said in its latest report assessing Harvey’s aftermath and its impact on the P/C insurance industry. “Over the past several years, the soft reinsurance market has allowed primary insurers to obtain favorable terms from reinsurers, including higher limits on catastrophe programs and extended hours clauses.”
As far as regional Texas insurers, A.M. Best said several have already faced a challenging 2017 first-half, due to spring weather losses. The ratings agency expects Hurricane Harvey to impact their earnings and capitalization, which could put pressure on negative ratings, though this should not be fatal by any means, A.M. Best said.
“In general, most companies maintain comprehensive reinsurance programs with reasonable retention levels, which will somewhat lesson the financial impact,” A.M. Best said.
Some of the biggest pressure will come through commercial insurance, due to significant property damage and business interruption claims, A.M. Best said.
“As was the case following Superstorm Sandy in 2012, commercial insurance claims are expected to compreise an outsized portion of overall covered losses from the storm, as flood – rather than wind – has been a driver of damage,” A.M. Best wrote. “Commercial insurance policies, particularly those covering large and complex properties, may provide some coverage for flood as a covered peril.”
Through this route, A.M. Best said there would be resulting claims for both actual property damage and also business interruption and contingent business interruption losses. One exception for this may be for small commercial insureds, who may find their claims options limited.
“For smaller commercial insureds …. The flood peril is more typically excluded, limiting claims costs, as [business interruption] coverage typically is available only when the interruption results from a covered peril,” A.M. Best said.
A.M. Best said it expects commercial claims to impact the inland marine line of business, and sees plenty of claims on their way for commercial auto physical damage.
The five largest commercial property writers in Texas based on direct written premiums written have a 25 percent market share of the total Commercial Property business in Texas, according to A.M. Best. They are: CNA, Liberty Mutual, Chubb, AIG and Travelers.
Source: A.M. Best